MBA Advocacy Update: June 8, 2020
MBA remains actively engaged with decision-makers at all levels of government to help shape the response to the effects of the pandemic on the mortgage market. Last week, the Senate passed legislation that would ease restrictions on the SBA’s Paycheck Protection Program, which President Trump signed into law on Friday. And finally, HUD released Mortgagee Letter 2020-16, which details the revised FHA policy for providing insurance on loans in “early payment forbearance,” or loans for which the borrower requests forbearance after closing but before FHA insurance endorsement.
Please continue to stay safe during this time, and feel free to reach out to us if you have any questions or if there is anything we can do to be of help.
1. Congress; Federal and State Regulators Continue Focus on COVID-19
MBA remains actively engaged with decision-makers at all levels of government to help shape the response to the effects of the virus on the mortgage market.
- MBA released the results of its latest Forbearance and Call Volume Survey, which estimated that the share of loans in forbearance increased to 8.46% as of May 24. The forbearance take-up rate increased only slightly from the prior week, with the Ginnie Mae market continuing to exhibit the largest share of loans in forbearance (11.82%). MBA will monitor the forbearance data closely as it works with policymakers to develop further options for servicers in need of liquidity support to meet advancing obligations.
- As is discussed in greater detail below, the Senate passed by unanimous consent legislation that would ease restrictions on the Paycheck Protection Program (PPP). The legislation, which was already approved by the House of Representatives, extends the period of time over which funds can be spent and reduces the share of funds that must be spent on payroll.
- On Thursday, HUD released Mortgagee Letter 2020-16, which details the revised Federal Housing Administration (FHA) policy for providing insurance on loans in “early payment forbearance,” or loans for which the borrower requests forbearance after closing but before FHA insurance endorsement. Whereas these loans previously were ineligible for FHA insurance, HUD will now allow them to be endorsed, subject to a two-year partial indemnification from the lender. This indemnification, which is governed by a new indemnification agreement, is equal to 20% of the initial loan amount. MBA appreciates the reversal of HUD policy regarding eligibility of these loans, but we do not believe indemnification is an appropriate remedy for properly underwritten loans without defects. We will continue to advocate for removal of unnecessary indemnification requirements to ensure broad access to credit for borrowers.
- The Consumer Financial Protection Bureau and the Conference of State Bank Supervisors issued joint guidance to mortgage servicers on implementation of congressionally-mandated forbearance for federally-backed mortgages. The guidance contains information and expectations regarding forbearance duration, hardship documentation, and potential steering of borrowers away from forbearance.
- MBA has been advised by CSBS that testing center capacity for the Nationwide Multi-State Licensing System and Registry Mortgage Loan Originator test has been improving. Many Prometric test centers are opening earlier and staying open later, with some offering new weekend hours. CSBS advises MLOs seeking to make their initial test appointment, or to reschedule a cancelled appointment, to consider alternative test centers for additional time and location options. To manually schedule or reschedule an appointment, MLOs should either log into NMLS and navigate to the Manage Test Appointments page or go directly to this website. Note that for the time being, the Prometric call center (1-877-671-6657) is not accepting calls.
- The Internal Revenue Service issued Notice 2020-39, providing answers to frequently asked questions on COVID-19-related relief for Qualified Opportunity Funds and their investors. The guidance provides important relief from certain requirements under the Code and its implementing regulations. The IRS also updated the existing Qualified Opportunity Zone Frequently Asked Questions.
- This week, the IRS re-opened its centers that are responsible for tax transcript processing. These centers continue to work through the backlog of tax transcript requests, and MBA will monitor progress over the coming weeks.
- The Financial Accounting Standards Board issued a one-year delay in the effective date of the new revenue recognition and lease accounting standards for private companies and not-for-profit organizations that have not yet issued (or made available) financial statements that reflect adoption of the new standards. Early application continues to be permitted.
- The next MBA all-member webinar on COVID-19 updates will be held on Monday, June 15. These calls provide MBA members with an opportunity to remain informed of the latest policy developments that will impact the industry as the COVID-19 response continues. Members can register now for the June 15 call.
Why it matters: These developments are indicative of the rapid response to the economic, financial, and health impacts of COVID-19, and are reflective of MBA’s focused advocacy for the industry as it seeks to continue to serve consumers.
What’s next: Further agency actions and updates are expected in the coming days and weeks. MBA will continue to provide information on these developments, including through our COVID-19 resource page.
2. Congress Passes PPP Modifications Bill Providing Further Relief for Small Businesses
On June 3, the Paycheck Protection Program (PPP) Flexibility Act of 2020 was passed by the Senate—on the heels of House passage the week before. The bipartisan bill modifies the $669 billion relief measure included in the CARES Act (P.L. 116-136) that provides low-interest loans to small businesses so they can meet their payroll (and other financial) obligations. Importantly, this legislation would lengthen the duration for businesses to utilize the proceeds of their loans, from eight to 24 weeks, and would lower the threshold of funds designated toward meeting payroll obligations from 75% to 60%. Although some Senate Republicans initially objected to the measure due to technical issues and other concerns, they agreed to pass the bill while they work on legislation to make further reforms.
- Why it matters: Flexibility on how recipient small businesses use PPP funding will small business recipients better manage their cash flow constraints and potentially designate a greater share of their assistance to non-payroll expenses.
- What’s next: President Trump today signed the bill into law. MBA will continue to monitor movement on a potential second technical fix bill coming out of the Senate.
3. Senate Banking Committee Continues Hearing Series On CARES Act Oversight
Last Tuesday, the Senate Banking Committee held an oversight hearing on Title IV of the CARES Act with witnesses from the U.S. Chamber of Commerce, American Action Forum and the Economic Policy Institute. Many Republican and Democratic Senators focused their questions on the Main Street Lending Facility and municipal liquidity facility. Witnesses and Senators expressed frustration with the Federal Reserve regarding the slow implementation and requirements of these two 13(3) facilities, and several Democratic Senators focused on the need to provide stimulus support to state and local governments.
- Why it matters: Tuesday’s hearing previewed the coming debate on the next legislative response to the economic fallout brought by COVID-19.
- What’s next: While the hearing was nominally about the implementation of Federal Reserve lending facilities established by a roughly $2 trillion economic relief package, the focus looked ahead to an upcoming economic package. As most senators tried to use witnesses to bolster support for provisions they want in the next bill and some hinted where compromises might be struck.
4. CFPB Proposes Rule; Provides Resources on LIBOR Transition
On Thursday, the CFPB announced several steps meant to further facilitate market participants’ efforts to phase out the use of the London Interbank Offered Rate. These steps include a proposed rule to address transition issues for both closed-end and open-end products, a set of FAQs regarding compliance with CFPB regulations, and an updated and streamlined CHARM booklet.
- Why it matters: These developments reflect the continued, steady progress being made to transition the mortgage market away from LIBOR ahead of its expected discontinuation.
- What’s next: Comments on the proposed rule are due by August 4. MBA will review its contents and work with interested members to develop recommendations for the CFPB.
For more information, contact Dan Fichtler at (202) 557-2780.
5. FHFA Finalizes Rule Revising Housing Purchase Goals for FHLBs
Following its proposed rule in late 2018, the Federal Housing Finance Agency last week issued a final rule on the housing goals associated with the Federal Home Loan Bank loan purchase programs. These goals, which apply to the Mortgage Purchase Program and the Mortgage Partnership Finance program, set minimum requirements for the purchase of affordable loans by the FHLBs that offer these programs.
- Why it matters: These goals represent one avenue for the promotion of greater mortgage credit availability for underserved borrowers. The final rule is consistent with recommendations submitted by MBA in early 2019.
- What’s next: FHFA will begin measuring and reporting on FHLB housing goal performance in 2021, though it will not take actions against any FHLBs for failing to meet the goals during a three-year phase-in period.
6. CFPB, CSBS Issue Joint Guidance to Mortgage Servicers
On Thursday, the CFPB and the Conference of State Bank Supervisors issued joint guidance to assist mortgage servicers providing CARES Act forbearance to consumers impacted by the COVID-19 pandemic. The guidance explains that practices such as requiring documentation from borrowers to prove financial hardship, failing to grant a forbearance that has been properly requested, or steering borrowers away from forbearance could violate the CARES Act.
- Why it matters: The FAQ provides clarity on CARES Act compliance and states that examiners will be evaluating whether servicers’ actions in this area violate the CARES Act or otherwise constitute a legal violation.
- What’s next: MBA will continue to engage with regulators on this issue to ensure servicers have clear guidelines on CARES Act compliance.
7. MBA Responds to CFPB’s Taskforce on Federal Consumer Financial Law RFI
Last Monday, MBA submitted comments in response to a CFPB Request for Information seeking recommendations for the Taskforce on Federal Consumer Financial Law (Taskforce), an independent advisory body within the Bureau. The RFI asks for public feedback “to help identify areas of consumer protection on which [the Taskforce] should focus its research and analysis during the balance of its one-year appointment.” In its comment letter, MBA recommends the Taskforce consider the issue of national data protection standards, as well as reforms to RESPA Section 8, the Loan Originator Compensation Rule and ATR/QM’s Appendix Q.
- Why it matters: The RFI is an opportunity to provide feedback which, through the Taskforce, may result in the Bureau taking actions to improve Federal consumer financial law.
- What’s next: MBA will monitor the Taskforce’s progress and engage should future opportunities to provide feedback arise.
8. MBA Meets with D.C. Commissioner to Discuss the District’s Residential Mortgage and Commercial Mortgage Deferment Program
On Tuesday, MBA met with Department of Insurance, Securities and Banking Commissioner Karima Woods to discuss proposed revisions to FAQs related to the implementation of the D.C. Residential Mortgage and Commercial Mortgage Program. The modifications to DISB’s guidance will reflect changes to the program required by legislation (B23-0759) amending the D.C. COVID-19 Response Supplemental Emergency Amendment Act of 2020, which will provide exemptions for federally backed mortgage loans and federally backed multifamily mortgage loans. MBA provided DISB with feedback on their proposed changes and offered assistance in connecting the department with contacts at HUD and with the GSEs to gather data necessary to launch a resource that will help DC renters determine if their landlords were the recipients of mortgage relief under the CARES Act.
- Why it matters: DISB’s new guidance will address amendments to the law establishing the DC Residential and Commercial Deferment Program, which will resolve many of the conflicts that existed between the federal and D.C. Law by exempting companies in compliance with the CARES Act.
- What’s next: B23-0759 has been transmitted to Mayor Bowser and awaits her signature. MBA will continue to work with DISB staff to improve their legislative guidance and implementation of the deferment program.
For more information, contact Kobie Pruitt (202) 557-2870.
9. California Assembly Appropriations Committee Improves Contentious Forbearance Legislation; However Problems with Bill Persist
Last Wednesday, legislation in Sacramento that would enact sweeping new forbearance standards for residential and multifamily mortgages was approved by the Assembly Appropriations Committee. The bill, AB 2501, is being fast-tracked for approval by the entire Assembly and was the focus of a Mortgage Action Alliance Call to Action last week. While the bill still contains several problematic provisions, amendments were made by the Sponsor, including addition of language to ensure that residential mortgage servicers that are subject to, and in compliance with, the federal CARES Act are also deemed to be in compliance with these state mandates. Additionally, language was deleted that would have eliminated foreclosure as a default remedy for any violation of the Act. MBA and the California MBA have partnered in advocacy and both joined a coalition with other trade associations on a letter to request these and other changes in opposing the bill.
- Why it matters: While the amendments represent significant improvements in the bill, there remain numerous provisions related to residential and multifamily mortgages that far exceed federal CARES Act mandates.
- What’s next: MBA and the California MBA will continue to collaborate in advocacy engagement. Additionally, real estate finance professionals in California are encouraged to join MAA and take action today.
10. MISMO Announces New Administrative Fee
On Monday, it was announced that the Mortgage Industry Standards Maintenance Organization (MISMO), MBA, and Mortgage Electronic Registration Systems (MERS) Boards of Directors approved a $0.75 administrative fee for every new loan registered on the MERS system.
- Why it matters: The new fee will allow MISMO to move more quickly to better assist mortgage lenders of all sizes and business models by seamlessly blending the integration and sharing of data across the real estate finance landscape, offering a variety of benefits for borrowers and industry.
- What’s next: MISMO is working on several other industry-enhancing projects, including a fully digitized loan file with standard elements, standardized industry definitions to promote document clarity and certainty, common closing datasets to create uniformity, and standardized servicing files to ensure compliance and ease servicing transfers.
For more information, contact Mike Fratantoni at (202) 557-2935.
11. The Month of MAA Campaign Recap
MAA, MBA’s free grassroots advocacy network, just wrapped up the Month of MAA, a national, industrywide campaign aimed at growing MAA and activating real estate finance professionals in key states and congressional districts. 110 companies participated, and through concurrent company campaigns, this effort generated 14,316 new MAA sign-ups and 3,636 MAA renewals, doubling the nationwide active MAA member total to 48,282.
- Why it matters: In recent weeks, MAA members have collectively sent over 50,000 emails to state and federal elected officials supporting the calls to action to protect and secure our industry. This is the most critical time for our industry to unite and play an active role in shaping legislation and regulations that impact our companies, our customers, and the broader economy.
- What’s next: Our goal is to grow our active MAA membership to at least 50,000 through company enrollment campaigns and continue helping them become informed and engaged industry advocates. Click here to request a report of your company or state’s involvement or to receive additional information about how to run a company campaign.
For more information, contact Alden Knowlton at (202) 557-2816.
12. Upcoming and Recent MBA Education Webinars on COVID-19-Related Topics
MBA Education continues to deliver timely single-family and commercial/multifamily programming that covers the spectrum of challenges, obstacles and solutions pertaining to the ongoing COVID-19 pandemic. Below, please see a list of upcoming and recent webinars – which are complimentary to MBA members:
- Accounting Considerations for Lenders on COVID-19 Programs – June 9
- CREF & COVID-19: May Performance and June Outlook – June 11
- Impact of Recent Reporting Trends on the Credit Score – June 12
- Moving Forward: Strategies for Secondary Marketing Success – June 23
- Managing Liquidity for Credit Unions – June 25
- Legacy Pricing Won’t Save You in Lending’s New Normal – July 15